Investors have filed a lawsuit against Bitwise Asset Management, accusing it of fraud and running a pump-and-dump scheme through its Bitwise 10 Crypto Index Fund (BITW) product. The plaintiffs are seeking $2 million from the company.

The lawsuit was filed by Vandelay Industries, which represents the Mukamal family. The plaintiffs allege that Bitwise’s top executives — CEO Hunter Horsley, president Teddy Fusaro, and chief investment officer Matt Hougan — orchestrated a pump-and-dump scheme and misled investors. The Mukamal family also accused Bitwise of recklessly and self-dealing in its asset management, violating signed agreements, and changing the structure of investments without investor consent.

The complaint states that in early 2018, the Mukamal family invested approximately $1.3 million in a private index fund, Bitwise HOLD 10 Private Index Fund. In 2020, Bitwise proposed to transition the fund from a private fund to a public entity on the over-the-counter (OTC) markets. At the same time, the asset management fees increased by 25%.

Investor Theodore Mukamal explained that these changes were forced upon them during the COVID-19 market downturn, significantly limiting their options. The lawsuit also cites investments totaling $4.85 million in 2021 under new terms that Bitwise executives may have also misrepresented. Mukamal highlighted that over the past three years, Bitwise’s flagship product, the 10 Crypto Index Fund (BITW), has traded at 35% to 65% below its net asset value (NAV). The company’s actions have caused investors losses of more than $2 million, which the plaintiffs are seeking in damages from Bitwise.

As a reminder, Bitwise launched exchange-traded funds (ETFs) for Web3 stocks in 2022. These ETFs became available to both large and retail investors.